How Lockheed and the Defense Industry Created Silicon Valley

Lockheed Martin’s SR-71

Competition breeds innovation. You can see this in the entrepreneurial and VC landscape where the wrong decision could mean the end of a startup and large losses, however, this is especially true in war when your competition is an existential threat. In 1945, the US was able to develop nuclear weapons to end the Second World War, however, its consequences directly led to the Cold War and an arms race between the US and the Soviet Union.

The true gravity of the Cold War goes beyond what we can comprehend today. Something that helped me contextualize this was looking at the results of a national poll asked in 1955. The poll asked, “What do you think you are most likely to die from?” Over half of America responded that they thought they would most likely die in thermonuclear war above any other cause. Let that sink in. Over half of the country thought they would die in nuclear war. You could say this was an existential threat.

World War 2 was the first war fought in the air, largely through the emerging Lockheed company, producing almost 20,000 aircraft during the duration of the war. Fighting in the air also meant more investment in radar research and technology. During the war, this research was concentrated in Cambridge at MIT and Harvard. A lot of this research was led by a man named Frederick Terman, a Stanford Professor who led the Harvard Lab during the war.

After the war, Terman returns to Stanford and is named Provost. He immediately goes out and starts recruiting the top talent in the US to Stanford, gives them immediate tenure, and implements a revolutionary technology transfer policy that makes it really easy for students and staff to innovate. Technology transfer is the collaborative process that allows scientific findings, knowledge, and intellectual property to flow from creators, such as universities and research institutions, to public and private users. Its goal is to transform inventions and scientific outcomes into new products and services that benefit society.

This was revolutionary because in the 1950s, most other institutions are notoriously unfriendly in technology transfer, wanting to retain IP rights, and in turn, smother any innovation before it can become commercialized. This is also the culture that drives silicon valley today, where rapid innovation is emphasized over the structural procedure of academia.

From his experience in Cambridge, Terman understands the existential competition of the Cold War and encourages his students and staff to commercialize research in the service of their nation. He knew that the commercial world would lead to more innovation than the academic one, and instead of wanting to selfishly keep research within the university, he encourages leaving the university for the benefit of the nation (AKA defense contracting).

At the same time, Terman carves out a large sect of land from Stanford’s real estate, dedicating it to be used as commercial spaces for startups and research. It’s where everyone from HP to Tesla to Steve Jobs’ NeXT have leased spaces from. One of the first, and biggest tenants of this space is Lockheed.

When Lockheed’s Missile and Space Company (LMSC) moved into Southern California, they become one of the largest employers in the area. By the 60s, they are employing over 30,000 people. The largest tech company at the time, HP, employed 3,000 people. LMSC was over 10 times larger than HP (considered one of the most significant early silicon valley companies) during the development of silicon valley. They were responsible for developing Sunnyvale, Burbank, and Palo Alto- some of the places that are synonymous with Silicon Valley today.

As LMSC developed cutting-edge weapons, they demanded cutting-edge technology, which became available in that area through the many startups that started to pop up around Stanford. Lockheed became the first and primary customer of the majority of the tech startups in the region, including startups that became Intel and Yahoo. On top of that, they hire and relocate an employee by the name of Jerry Wozniak to this area. He had a son named Steve who started a company called Apple.

It could be argued that Lockheed’s LMSC and defense contracting, as encouraged by Frederick Terman, was directly responsible for the rise of the modern Silicon Valley, which remains one of the primary centers of industry today in the US. They laid the infrastructure and the ethos for the industry which operates today and are directly responsible for some of the largest companies there today.

Ironically, the way Lockheed and the defense industry operate today would be totally incompatible with silicon valley, which has moved from a hardware industry to a software industry. Companies like Palantir had to sell the DoD laptops with their software loaded onto them so the government could buy a physical thing that had a cost of goods sold associated with it, such that it could be bought in a cost-plus way.

I felt conflicted writing this story because war is obviously bad (among other things), however, the influence the military-industrial complex has had on our modern way of life is undeniable. I do not wish to glorify Lockheed Martin or its products, however, it is quite possible the modern entrepreneurial landscape and the iPhone that you’re reading this on might not exist without them.